Bombay High Court [Read Order]

The Bombay High Court held that the principal service tax dues quantified by Authority have to be settled at the rate of 5% as per the resolution plan.

The petitioner, GGS Infrastructure Private Limited is registered under the Companies Act, 1956 and is engaged in the business of providing cranes for hire/lease to other companies involved in infrastructure business. It is stated that as had happened with many companies engaged in infrastructure business, petitioners also underwent a period of great financial stress which resulted in failure to repay dues of various creditors.

Before adjudication respondent had issued notices under section 87(b)(i) of the Finance Act, 1994 to branch managers of banks where the petitioner had maintained its accounts directing them to transfer the amounts held by them to the government treasury.

Similar notices were issued to various debtors of the petitioner as well directing them to deposit the amounts owed by them to the petitioner directly to the account of government treasury.

In the process respondent authority had recovered a total amount of Rs.6,23,82,214 on account of service tax liability of the petitioner.

The amount of service tax dues having crystallized, the resolution plan says that the same would be settled at 5% of the principal dues adjudicated.

The division bench of Justice Ujjal Bhuyan and Justice Abhay Ahuja observed that the amount that the petitioner would be required to pay is 5% of Rs.7,02,20,725. In so far the recovered amount i.e. Rs.6,23,82,214 is concerned, the same is part of the total demand determined i.e. Rs.7,02,20,725.

The court ordered that after retaining 5% of Rs.7,02,20,725.00, the respondent would be duty-bound to refund the balance amount to the petitioner which will not only be in terms of the resolution plan and thus in accordance with law but will also be a step in the right direction for revival of the petitioner which is the key objective of the Code.

The court directed the respondent authority to make a refund after retaining 5% within a period of three months.

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